Accidental landlord: accounts question

[Gilgongo]

My father died earlier this year and is survived by his wife. He was managaing a small BTL property which is now going to be my responsibility (although she inherits it).

Without getting into issues like whether we should hire an agent, etc. I'd like to ask a specific question about bank accounts:

My father had a separate account for the BTL. In the name of simplicity I'd like to close this and get the tenant to pay in to my mother's current account as her widow's pension could do with topping up.

Going forward, I'm thinking I could pay for (and document) repairs and maintanance myself, and recover costs from her. But are there any practical considerations I should bear in mind? I don't know about tax returns, for example. I suppose separate accounts is good practice, but I'd have to keep it funded (the rent goes to mum), remember to use it, etc. It's a tiny property, good condition, the rent is low, and the tenanats have been as good as gold for 17 years and counting (just been to see them).

G

[MyNameIsUrl]

I've had a BTL business for decades and never needed a separate bank account. Pretty well every transaction is supported by a paper trail, whether it be a monthly statement from the agent showing rental income, agent's fees, repair bills, or an annual mortgage statement or insurance premium renewal. I keep a record in a spreadsheet (date, amount, type, name of organisation) which totals up the numbers I need for the tax return. It seems to me to overcomplicate things having a separate account as there will be extra transactions to withdraw or top up funds in that account.

[modellingman]

My father died earlier this year and is survived by his wife. He was managaing a small BTL property which is now going to be my responsibility (although she inherits it).

Without getting into issues like whether we should hire an agent, etc. I'd like to ask a specific question about bank accounts:

My father had a separate account for the BTL. In the name of simplicity I'd like to close this and get the tenant to pay in to my mother's current account as her widow's pension could do with topping up.

Going forward, I'm thinking I could pay for (and document) repairs and maintanance myself, and recover costs from her. But are there any practical considerations I should bear in mind? I don't know about tax returns, for example. I suppose separate accounts is good practice, but I'd have to keep it funded (the rent goes to mum), remember to use it, etc. It's a tiny property, good condition, the rent is low, and the tenanats have been as good as gold for 17 years and counting (just been to see them).

G

I've had a BTL business for decades and never needed a separate bank account. Pretty well every transaction is supported by a paper trail, whether it be a monthly statement from the agent showing rental income, agent's fees, repair bills, or an annual mortgage statement or insurance premium renewal. I keep a record in a spreadsheet (date, amount, type, name of organisation) which totals up the numbers I need for the tax return. It seems to me to overcomplicate things having a separate account as there will be extra transactions to withdraw or top up funds in that account.

There is no requirement to have a separate bank account for managing the BTL business. Personally, I find that having one makes the accounting simpler but that is a matter of personal preference and MyNameIsUrl has a different preference. It is whatever works for you.

Where I suspect I follow a similar practice to MyNameIsUrl is in maintaining a spreadsheet of all the transactions for the business. In my case, I use a simple code to classify each transaction (eg RNT for rent, R&M for repairs and maintenance, PRF for professional fees), with the codes based on the reporting categories used in the UK property section of the Self Assessment tax return. Calculating the numbers for the return is then mainly the simple application of a few SUMIFS(). The exception to this is mortgage interest which needs to be separated out from any capital repayments in the monthly mortgage payments. Incidentally, mortgage interest is not now treated as an expense but it is eligible for basic rate tax credit.

My list of transactions reproduces the bank statement and I include codes for all non-business transactions such as transfers to/from other personal bank accounts, etc. I also keep a list of receipts, (which I scan if they are not provided in electronic format) and note the file name of the receipt as part of the transaction row in the spreadsheet.

Using a spreadsheet like this also means you'll be quite well prepared if/when MTD (making tax digital) eventually arrives. The transaction rows are your digital records and the SUMIFS() your automated processing of those records. The final bit will be "bridging software" for linking the summary values in your spreadsheet to HMRC systems for submission. Digital versions of receipts are not a requirement of MTD, but again a personal preference.

modellingman

[Gilgongo]

Ah thanks - good to know. I am also a fan of SUMIFS() and that's pretty much what I was planning on the documentiation front too

G

[monabri]

My wife has a flex account with the Nationwide. This is her money.

She owns a rented property 50:50 with her brother. Payments go into a separate Nationwide account.

When she logs on, she sees both accounts. When her brother logs in, he sees only the 2nd account.

[Gerry557]

Is you mum happy for you to be in her finances? She might prefer a separate rent account so you can have control of that whilst she maintains her own privacy.

In some ways using a separate account is simpler and everything is self contained and should be easier to find transactions than mixed in with someones everyday accounts.

I think I would keep the account. Why was it done that way to begin with.

[Infrasonic]

My father had a separate account for the BTL. In the name of simplicity I'd like to close this and get the tenant to pay in to my mother's current account as her widow's pension could do with topping up.

Why not just set up a monthly standing order to your mothers current account? I'm assuming the rent account is a personal account that isn't incurring bank charges?

I always kept business and personal income/expenditure separate with accounts and cards (DC/CC) so would err that side of the line - although with dedicated business accounts/cards you have to weigh up bank charges v accounting convenience.

The way I ran my mums house/financial affairs via an EPA when I rented it out (and subsequently sold it) was to have a dedicated Microsoft account and Outlook.com email address with associated office Excel spreadsheets/ contacts database et al.
That was so my sister and I could have dual admin access without getting into reply all/forwarding emails etc (been there, a complete nightmare).

If you go down the letting agent route I'd strongly suggest doing it that way - if you can avoid using an agent at all and self manage even better...

[Gilgongo]

I take the points about pros and cons, but since I've never managed a letting before I think I'll keep it on my own account for now and if it turns out I feel the need for a separate one I can always open that, or run it a different way (I have sister and she might have some interest in things over time).

[Charlottesquare]

If rent under 10k ignore, if over then whilst currently somewhat on hold Making Tax Digital may in future impact reporting requirements (though whether £10k is still to be threshold is moot). A distinct bank account with all income and costs met through same may make future reporting easier, especially if cash basis reporting re tax. You can maybe then keep a float in the account and transfer excess funds to Mum every so often as they accrue.

I find distinct account easier with clear double entry accounting, but maybe that is just me.